Yes, Jeremy Corbyn’s far left shadow chancellor John McDonnell is a joke – but the threat he poses is all too real

It would be easy simply to dismiss John McDonnell as a far left nutcase (Source: Getty)

"Know Your Enemy" is advice worth heeding. And it is particularly appropriate for those of us who believe in free markets when faced with the new shadow chancellor John McDonnell.

For it would be easy simply to dismiss him as a far left nutcase. Not because he is not far left (he is). Not because he isn’t wrong about most things (he is). But because he realises that establishing popular credibility for economic competence is a prerequisite for electoral success. Consider these apparently measured statements that he wrote in a recent Guardian article:

“Labour under Jeremy Corbyn is committed to eliminating the deficit... We accept that cuts in public spending will help eliminate the deficit… Alongside deficit elimination, the Corbyn campaign is advocating a fundamental reform of our economic system. This will include the introduction of an effective regulatory regime for our banks and financial sector; a full-blown Glass-Steagall system to separate day-to-day and investment banking; radical reform of the failed auditing regime; etc etc”

Not much wrong there – at first sight. Much of it, I suspect, would also be pretty popular. As are other proposals he has made, such as renationalising the Post Office and the railways, soaking the rich, introducing “People’s QE”, and a Financial Transaction Tax. The polling (ahem) is conclusive: each one of these policies has widespread public support (a potent illustration of how the centre right has failed to explain and popularise capitalism).

So the danger is that mockery of the man or of his politics could be counter-productive. Far better, surely, to make the case from first principles as to why McDonnell’s proposals would be economically destructive.

And that should not be too difficult: consider his plans to renationalise the banks, the railways, the Post Office and the utilities. The current market capitalisation of the larger companies in these industries is several hundred billion pounds.

If renationalisation were to go ahead, it would either be unaffordable (remember that McDonnell wants to eliminate the deficit) or it would be the biggest ever heist on every individual with a pension fund or an investment.

Not only that, but Britain’s key industries, many of them in urgent need both of long-term investment and greater competition, would then be starved of capital, would be run from Whitehall and would be even more of a monopolistic cartel than some of them are already.

Or you can look at McDonnell’s tax proposals: he has talked about a 60 per cent top rate of income tax, additional wealth taxes, a Financial Transaction Tax, higher corporation taxes, and a 7 per cent increase in national insurance.

Each one of these can be proved to be de facto wrong – indeed, by pushing Britain further down the wrong side of the Laffer curve, many of them could end up raising far less than the status quo. But taken together?

The damage to Britain’s pro-enterprise reputation, to investment, to jobs would be huge and enduring.

Then he wants to “enhance the role of trade unions”, not least in terms of “sectoral collective bargaining”. It is easy to see why, given the importance of trade union funding to the Labour Party.

For it can be too easy to forget the extraordinary collapse in union membership: when Margaret Thatcher came to office in 1979, 82 per cent of workers in the UK had their main terms and conditions determined by a union-negotiated collective agreement.

The latest figures now show that it is down to just 23 per cent (the great majority of which are, of course, in the public sector).

Other policies are not only wrong but self-contradictory: reopening coal mines but banning the extraction of cleaner, cheaper shale gas. Or abolishing Right to Buy for social tenants but creating new Right to Buy schemes for private sector tenants. It should not be hard to point out these and many other absurdities.

So here we are faced with a far left economic agenda that would take us back to the 1970s and that would be painfully and lastingly destructive to the British economy. The danger is that, while deeply misguided, this agenda is also cunningly populist.

And the message from Syriza in Greece and Podemos in Spain should be clear: if they are not robustly challenged, these policies, wrong as they are, might resonate with a significant proportion of the electorate.